Current Situation

The most significant financial incident last week was the quiet withdrawal of the $100,000,000 bankers' loan to Italy. J. P. Morgan & Co. last fall headed a syndicate of 1,000 banks to float this loan, which was made immediately upon the arrangement of the Italian debt settlement. Enthusiasts oversubscribed the bonds at 94%, but their subsequent sale has been most lethargic. Last week the bankers withdrew their support, and the quotations dropped at once to around 89 with very little turnover.

The significance lies, not especially in a general distrust of European government bonds, but rather in the spreading reluctance of chattel and security holders against expanding their credit obligations. In accordance with this picture, loans and discounts of Federal Reserve member banks continued to decline.